Beyond Wald's Equation and the Optional Sampling Theorem

TL;DR

This paper extends classical martingale stopping time results by establishing new theorems that characterize expectations and finiteness conditions for stopped martingales, with implications for tail probabilities and behavior of extended stopping times.

Contribution

It introduces two fundamental theorems and a corollary that generalize Wald's equation and the Optional Sampling Theorem for arbitrary mean zero martingales with extended-valued stopping times.

Findings

Characterization of expected values of stopped martingales under new conditions

Conditions ensuring finiteness of extended-valued stopping times with probability one

Insights into tail probability decay rates for stopping times

Abstract

From the perspective of expectations of randomly stopped sums, Wald's equation and the Optional Sampling Theorem identify situations in which the stopping time can be decoupled from the stopping place, acting as if the two were independent. Herein we consider arbitrary mean zero Martingales and their extended-valued stopping times, proving two fundamental theorems and a general corollary. Examples, counter-examples and discussion are also included. The first theorem establishes conditions under which a stopped martingale's expected value can be characterized by a finite real number, also yielding a new expectation limit. Two corollaries and an application provide information on the rate of decay of the tail probability of the stopping time. The second theorem provides sufficient conditions to ensure that an extended-valued stopping time is finite with probability one. We demonstrate these results through various examples and explore their implications for different families of martingales. Our findings extend classical results in martingale theory and provide new insights into the behavior of stopped martingales, especially when the expected values are the stopped Martingale on the set where the extended-valued stopping time $T$ is finite is different from the expected value of the Martingale at time 1.